Loomis Sayles Bond Fund Manages 5.9% Gain In 2013

By Michael Aneiro

While Pimco‘s flagship bond fund posted a 1.9% loss last year amid widespread losses for bond funds, the $21.9 billion Loomis Sayles Bond Fund (LSBDX) managed a 5.9% total return. How? By straying from core bonds like Treasuries and mortgage bonds, which suffered the most when rates rose last year, and loading up on junk-rated debt and even allocating 5% of its assets into stocks. Min Zeng reports in today’s Wall Street Journal that the Loomis fund was one of several bond funds that managed gains despite broad bond-market losses, with gains generally going to funds that made some unorthodox bets:

Also gaining was Michael Hasenstab’s $70.2 billion Templeton Global Bond Fund at Franklin Templeton Investments, which bet on Irish government bonds before the debt’s price surged. The fund posted a 2013 total return of 2.22%….

Mr. Fuss said in an email Thursday that he is “very pleased” with his fund’s performance. Mr. Hasenstab, in an emailed statement, said his fund was able to “exploit a truly global opportunity set of investments while also minimizing interest-rate risk.”

The typical domestic-bond funds—known in industry lingo as intermediate-term U.S. bond funds—posted a negative total return of 1.44% on average in 2013, according to Morningstar. So-called nontraditional bond funds, which invest globally, posted an average total return of 0.27%, while multi-sector bond funds, which venture into bonds sold by lower-rated U.S. companies, posted a return of 1.83%.

Analysts warn that investors in funds purchasing riskier securities could get hit if the market reverses.